Weighing The Week Ahead: Has The Trump Trade Reached The Tipping Point?

The Week Ahead Calendar

We have a normal economic calendar, featuring inflation data and the FOMC minutes. The JOLTs report will also contribute to the normal tendency for a focus on the Fed.

Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

Next Week’s Theme

The economic calendar includes the FOMC minutes, inflation data, and the JOLTs report. All of these are of interest to Fed-watchers. Normally that would be our theme for the week.

Instead, there is a sense of unease among many. Those closely following stocks are observing wild daily swings – as much as 1000 Dow points in slightly over one trading day. The trading swings are not driven by “real” news about earnings or the economy. Instead we get a statement from China affecting futures trading while US markets are closed. Then there are surprise tweets and announcements during the trading day.

When a surprise hits the wire, algorithms apply recent computer learning, human traders react, support and resistance levels are hit, and moves can become larger. My younger blogging colleagues would say, “What the heck (TM OldProf euphemism) is going on?”

For the punditry, the volatility combined with the loss of the early gains for the year has them wondering. I expect many to be asking: Is this the tipping point for the Trump trade?

Usually I offer a range of viewpoints in this section. There are certainly many who expect an imminent market decline, and some expect a large one. Others question the underpinnings of the “Trump Trade.”

You can find such viewpoints easily enough. In doing my research this week I was struck by how many colleagues whom I respect shared my current attitude: Solid fundamentals for stocks, but continuing, unsettling threats. Here is a review of some experts and thought leaders.

  • Eddy Elfenbein notes the decline below the 200-day moving average of the S&P 500. He uses the ratio of the equal-weighted S&P 500 to the cap weighted version as a measure of the opportunity for stock picking. Read the entire post for his typically clear explanation of how the rotation from high-fliers provides opportunity.
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